Editorial: President’s tax-cut follies

Saturday, May 13, 2006 | 7:09 a.m.

The Republican-controlled Congress has passed a tax cut plan that would extend tax breaks that benefit the wealthy, at a cost to the federal Treasury of about $70 billion over five years. The deal advocated by President Bush - who seeks even more extensions for tax cuts he has engineered in past years - is expected to be signed into law next week.

A key part of the deal would extend a capital gains tax break on investment income from 2008 to 2010. Supporters of extending the tax cuts, especially the capital gains break, say the cuts have spurred economic growth and business investment, which ultimately bolsters federal coffers.

But we agree with Democrats who oppose the tax break and call it another GOP gift to the rich at a time when federal deficits are spiraling to all-time highs. Middle-income households would receive an average tax cut of about $20, while the richest 1 percent of Americans would net $13,849, and millionaires would average $41,977, according to the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute.

"This tax bill shows the administration's true colors," Sen. Charles Schumer, D-N.Y., said, "and only the very wealthy are going to see green."

This isn't the time to cut taxes on the wealthy. Deficits happen when spending outstrips tax revenues, so it is baffling that Congress would pass a tax cut that pads the investment portfolios of affluent Americans.

The tax break agreement comes just months after Congress orchestrated budget cuts that hurt low- and middle-income Americans. "It's now clear that those budget cuts served merely to pay for a fraction of these tax cuts, not to reduce the deficit," said Robert Greenstein, executive director of the Washington-based Center on Budget and Policy Priorities.

Greenstein argued that the tax cut widens the disparity between the haves and have-nots in this country. We agree. Congressional budget priorities are out of whack.